The Kay Bailey Hutchison Center for Energy, Law, and Business

The political economy of energy policy in the United States is dominated by a combination of ideological partisanship and interest group lobbying. Both are reflected in the widespread belief that, under the Obama administration, the Environmental Protection Agency (“EPA”) was engaged in a misguided “war on coal,” despite the coal industry’s status as the leading industrial source of air pollution and compelling evidence that the benefits of EPA’s regulations vastly exceed their costs. This conflict is persistent and unresolved, notwithstanding repeated involvement of the Supreme Court over the last few years. The politics of this conflict are compounded by tensions between electricity managers and environmental regulators. Much of this tension is driven by competing perspectives: EPA’s focus has been on the national costs and benefits of its rules, whereas grid managers operate regionally. This Article resolves the apparent conflicts by downscaling the regulatory analyses of three highprofile (and highly litigated) EPA rules addressing emissions of conventional pollutants, air toxics, and greenhouse gases associated with climate change from coal-fired power plants. This Article utilizes complementary EPA databases and draws on several model estimates to examine the regional impacts— both costs and benefits—of regulations targeting coal-fired power plants. Overall, this Article finds that the distribution of both the compliance costs and environmental benefits of the rules are roughly commensurate with each region’s reliance on coal-fired power plants, particularly older facilities. That is, the benefits of reducing emissions under these rules are predominantly local. As a consequence, regulatory benefits exceed costs not only at the national level but at the regional level as well, and typically by large margins. Further, with a few important caveats, we find that while the EPA rules will hasten power plant closures, most will occur in electricity markets that have sufficient excess capacity to mitigate potential threats to electricity supplies and reliability. Nevertheless, opposition to the rules persists, which we explain as the product of a combination of both interest group and ideological/partisan opposition. Interestingly, ideological/ partisan opposition appears to hold greater sway based on varying levels of political opposition regionally and may— incrementally—be shifting in EPA’s favor.